Norbord Inc.
said Monday it will acquire
Ainsworth Lumber Co.
in a friendly all-stock deal that will create a global wood-panel giant with annual sales exceeding $1.6 billion.

The two Canadian companies said the deal will bring together their geographically complementary, low-cost operations and provide them with more financial flexibility to capitalize on the U.S. housing recovery as well as growing demand for their products in Europe and Asia. The merged company will focus on the production of oriented strand board, an engineered wood panel commonly used in home building.

Norbord will offer 0.1321 of a share for each Ainsworth share in the transaction, which the companies said represents a premium of 15% to Ainsworth’s 20-day volume weighted average price. The transaction will create a company with a market capitalization of about 2 billion Canadian dollars ($1.75 billion). Norbord’s shares closed Friday at C$23.96 on the Toronto Stock Exchange, while Ainsworth’s shares closed at C$2.98.

Norbord operates seven mills in North America, mainly in the U.S. southeast, and four mills in Europe. Ainsworth operates four mills in Canada. The combined entity would have total oriented strand board capacity of about 7.7 billion square feet, making it the largest in the global oriented strand board industry, they said.

The companies said they expect to achieve operating synergies of about $45 million a year mainly through best practices and technology transfers in their mills, sales and logistics improvements and cost-cutting steps.

Norbord Chief Executive
Peter Wijnbergen
will lead the combined entity, which will continue under the Norbord name. Ainsworth CEO
Jim Lake
will stay on with the combined company in an advisory capacity for a period of six months.

Brookfield Asset Management Inc.
and its affiliated entities, which control approximately 55% and 52% of the outstanding common shares of Ainsworth and Norbord respectively, have agreed to vote in favor of the transaction. Upon closing, the Brookfield entities will control about 53% of the outstanding common shares of the combined company.